Financial settlement systems and methods

ABSTRACT

System and methods for facilitating the settlement of financial accounts across different entities utilize a host computer system that tracks financial transactions made at each merchant location or store and uses this information to reconcile accounts across different entities. In one embodiment, the host computer periodically performs a net settlement analysis of the transactional data received from each entity&#39;s stores. A request is prepared to transfer funds from each entity&#39;s bank account having a positive net settlement amount into a central entity bank account. A request is also prepared to transfer funds into each entity&#39;s bank account having a negative net settlement amount from the central entity bank account.

BACKGROUND OF THE INVENTION

This invention relates generally to the field of stored value accounts,and in particular to accounting practices relating to such accounts.More specifically, the invention relates to the management of storedvalue transactions that occur across multiple business entities.

Stored value accounts have gained widespread use in the United States,among other countries. Such stored value accounts are typicallyassociated with a card having an account number, and are often referredto as “gift cards.” These cards can often be purchased at a retaillocation for a special amount, e.g., $20. After paying for the card, theaccount number is read from the card, such as by using a mag stripereader. The account number is transmitted to a database where theassociated account is credited for $20. Each time a purchase is made,the account is debited by the purchase amount.

One issue that arises when using such cards to make purchases is how toaccount for transactions that occur across different business entities.Such situations may arise, for example, when merchants are franchised orhave affiliate locations. For example, a franchised organization isoften made up of various franchisees that independently own and operatetheir own store or groups of stores. Such franchisees typically utilizetheir own accounting systems. As such, if a customer purchases a giftcard at one franchise location and then attempts to use the card to makea purchase at another franchise location that is separately owned and/ormanaged, there is no way to reconcile accounts between the twofranchisees. As such, many franchise locations simply refuse to honorgift cards purchased at other locations, thereby reducing theirattractiveness to consumers.

BRIEF SUMMARY OF THE INVENTION

The invention provides systems and methods for facilitating thesettlement of financial accounts across different entities. Theinvention utilizes a host computer system that tracks financialtransactions made at each merchant location or store and uses thisinformation to reconcile accounts across different entities.

For example, in one embodiment the host computer periodically performs anet settlement analysis of the transactional data received from eachentity's stores. A request is prepared to transfer funds from eachentity's bank account having a positive net settlement amount into acentral entity bank account. A request is also prepared to transferfunds into each entity's bank account having a negative net settlementamount from the central entity bank account.

The net settlement analysis may be performed by subtracting all negativeadjustments from all positive adjustments that occurred within a certaintime. Examples of negative adjustments include redemptions or purchasesmade at stores, and examples of positive adjustments include activationsor reloads made at stores.

Conveniently, the request to transfer funds may be in the form of an ACHfile. In this way, the host computer may send the file to theappropriate banks to transfer the funds to and from each entity's bankaccount.

The host computer system may comprise a transaction processor thatprocesses incoming financial transaction data. For example, thetransaction processor may process the data to activate new accounts, addvalue to an existing account, or maintain records of balances ofexisting accounts. The host computer may also have a settlement engineto perform the settlement analysis based on each of the entity's data.

The transaction processor may conveniently receive the transactionaldata from various point of sale devices that may be located within thestores. Also, various types of presentation instruments may be used tostore customer account information that may be read by the point of saledevices.

In another embodiment, the host computer may settle the accounts byanalyzing each of the transactions to determine the store in which thetransaction originated. The host computer may also maintain a record ofthe transactions that occurred within entities other than where theassociated customer account originated. For the transactions thatoccurred within one of the entities other than where the associatedaccount originated, the host computer periodically prepares a request totransfer funds into or out from the bank accounts of the entities wherethe transactions occurred, and out from or into the bank accounts of theentities where the associated account originated, depending on whetherthe associated accounts are to be debited or credited.

For example, where the transactions comprise redemptions that occurredwithin the entities other than where the accounts originated, requestsare periodically created to transfer funds into the bank accounts of theentities where the redemption transactions occurred and out of the bankaccounts of the entities where the associated accounts originated.

As another example, for reload transactions that occurred within theentities other than where the associated accounts originated, requestsare periodically prepared to transfer funds from the bank accounts ofthe entities where the reload transactions occurred and into the bankaccounts of the entities where the associated accounts originated.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1A is a front view of one embodiment of a presentation instrumentthat may be used in accordance with the invention.

FIG. 1B is a rear view of the presentation instrument of FIG. 1A.

FIG. 2 is a schematic diagram of a point of sale device that may be usedin accordance with the invention.

FIG. 3 is a schematic diagram illustrating both a system and a methodfor settling accounts across multiple entities according to theinvention.

FIG. 4 is a schematic diagram illustrating another system and method forsettling accounts across multiple entities according to the invention.

DETAILED DESCRIPTION OF THE INVENTION

The invention provides for the settlement of financial accounts wherethe underlying financial transactions occur across multiple differententities. Although useful with essentially any type of financialaccounts, the invention will find particular use with stored valueaccounts.

Such accounts typically have an associated identifier that mayconveniently be stored on a presentation instrument, such as a card.Such presentation instruments may initially be in an inactive statewhere no value is associated with the presentation instrument. Toassociate a value with the account, a consumer may purchase one of thecards for a certain amount, such as fifty dollars. Conveniently, thistransaction (referred to as an activation) may be processed at amerchant location. In such cases, the merchant collects a payment, usingcash, credit card, debit card or any other acceptable form of payment,and enters this information into a point-of-sale device. The accountidentifier associated with the presentation instrument is also enteredinto the point-of-sale device. For example, the identifier may be storedon a magnetic stripe, on a bar code label, or the like. Examples of suchpoint-of-sale devices that may be used to capture and/or transmit suchinformation to a host computer system are described in copending U.S.application Ser. No. 10/116,619, filed Apr. 3, 2002, the completedisclosure which is herein incorporated by reference. However, it willbe appreciated that the invention is not intended to be limited to aspecific type of processing/reading device. For example, other ways oftransmitting information include by telephone (such as by using an IVRsystem), by contacting a customer service representative or the like.Reload transactions, where value is added to an existing account, mayoccur in a similar manner.

Such information is transmitted to the host computer system which has arecord of the account identifier. Such information may be transmittedacross a variety of networks including telephone networks, credit cardnetworks, wide area networks, the Internet, wireless networks, and thelike. Further, depending on the type of processing device used totransmit the information, such devices may also be coupled to afinancial network, such as a credit card or ATM network, or may have adirect connection to the host computer system. If connected to afinancial network, the host computer system may be configured todetermine that the transaction is related to a stored value accountrather than a traditional credit or debit card and may process theinformation appropriately.

When such information is received at the host computer system, the valuethat was paid by the consumer is associated with the account identifier.In so doing, the account is activated so that the consumer may then usethe presentation instrument for making a subsequent purchase.

To redeem part or all of the value associated with the presentationinstrument (referred to as a redemption transaction), the consumersimply needs to provide the account identifier at the time ofredemption. For example, if a consumer desired to purchase a video, theconsumer may simply provide the presentation instrument to the clerk atthe time of check out. The identifier may then be read from thepresentation instrument using a point-of-sale device and transmittedback to the host computer system. Along with this information, alocation of the transaction may also be transmitted. This may be enteredand transmitted using any of the techniques previously described. Thehost computer system is configured to determine the amount of valueremaining in the account and to debit the account by the transactionamount if sufficient value exists in the account. Further, informationconfirming the transaction may be transmitted back to the point-of-saledevice.

Other information regarding the transaction that may be transmitted backto the point-of-sale device includes the amount debited, the newbalance, and the like. This information may be displayed by thepoint-of-sale device and may optionally be printed to provide a paperreceipt.

Consumers typically perform transactions, such as redemptions,activations, reloads and the like at merchant locations, such as stores,using the Internet or from some other type of network. These stores maybe part of the same business entity or may be separate. For example, abagel franchise may have stores in California that are owned andoperated by one business entity, while the stores in Oregon are ownedand operated by another business entity. When transactions areperformed, they are transmitted to the host computer system forprocessing. The host computer system is also used to determineappropriate credits and debits to each entity's bank account based oncertain criteria. Periodically, the host computer system may preparerequests to transfer funds into and out from the entities' bank accountsin accordance with the criteria.

For example, according to one scheme, each transaction is tracked todetermine its location. The transaction location is compared with theentity where the associated account was activated (referred to as theoriginating entity). Based on the type of transaction and whether thetransaction locations is within the originating entity, an entity's bankaccount may be credited or debited during the next reconciliation cycle.

As another example, a central bank account may be used to reconcile eachentity's bank account. With such an embodiment, only the location wherethe transaction originated need be monitored. Periodically, eachentity's bank account is brought to a zero balance by transfers to orfrom the central bank account based on whether the entity has a positiveor a negative transaction total for a given period.

Referring now to FIGS. 1A and 1B, one embodiment of a presentationinstrument 10 that may be used with the invention will be described. Ingeneral, the presentation instruments of the invention may beconstructed of a wide variety of materials that are capable of storingan identifier that uniquely identifies the associated account. Forexample, the material may comprise a card 12 (that in turn may beconstructed of plastic, cardstock, paper, or the like). Other materialsinclude a computer disk (such as a CD, DVD or the like) or othertangible media. Further, the identifier may be stored in a variety offormats, such as in print, on magnetic media (such as a magnetic stripe14), in a bar code format 16, in a computer processor (also known as asmart chip) or the like. Appropriate readers may be employed at thepoint-of-sale to read such formats and then transmit them to the hostcomputer system for processing. Card 12 may also include merchantidentification information, such as a name, logo, or the like.

Referring now to FIG. 2, a point-of-sale device 20 that may be used willbe described in greater detail. In so doing, it will be appreciated thatthe invention is not intended to be limited for use with only a specifictype of point-of-sale device. Indeed, any type of processing orcomputing device that may transmit and receive data over a network maybe used.

Point-of-sale device 20 comprises a housing 22 having a display screen24 and input devices 26. Conveniently, input device 26 may comprise keysor buttons that may be depressed to enter information into apoint-of-sale device 14. Input devices 26 may each be associated withone or more letters or other alpha numeric characters, or may operate asfunction keys.

Point-of-sale device 14 also includes a reader 28 that may be used toread information from mag stripe 14 of presentation instrument 10.Alternatively, reader 28 may be configured to read a variety of otherformats such as bar code labels, smart chips, and the like in a mannersimilar to that previously described.

Referring to FIGS. 3 and 4, two embodiments of systems and methods thatmay be used to reconcile accounts across multiple entities will bedescribed. Both embodiments utilize a host computer system 30. A widevariety of information may be stored in computer system 30. Suchinformation may include, for example, account identifiers that uniquelyidentify each account. Other information that may be associated witheach account identifier includes an opening balance, an originatingentity, an existing balance, transaction amounts associated with eachtransaction, including debits to the account, redemption locations,redemption times, redemption amounts, local or transactional currenciesused for various transactions for each entity's bank account, exchangerates used in converting currencies, entities for each of the locations,bank account information, and the like. Such a host computer system maybe configured as a server computer with an associated database, as amainframe computer, or the like. One example of such a host computersystem is the one utilized by IPS Card Solutions, a division of FirstData Corp.

Transactions originate from consumers 32 that may use presentationinstruments (such as described in connection with FIG. 1) that are readusing point of sale devices (such as described in connection with FIG.2). To perform a transaction (such as an activation, a redemption or areload) a consumer 32 proceeds to a store (or other transactionlocation) that can originate the transaction. As shown in FIG. 3, eachstore is part of a business entity. For convenience of illustration, thestores are consecutively numbered as Stores 1-12 and the businessentities are labeled as Entities 1-3. In so doing, it will beappreciated that the invention may be used with other numbers ofentities and stores, as well as the number of stores within a particularentity.

According to the invention, consumers may perform transactions in asingle store, in multiple stores and/or within stores of multipleentities. The transaction information from such transactions istransmitted from the point of sale device in each store to host computer30 where they are processed using a transaction processor 34. Theresults produced by host computer 30 are transmitted back to the pointof sale device where the transaction originated so that the transactionmay be completed.

Host computer 30 also performs an analysis of each transaction todetermine if the transaction occurred within the entity where theaccount was originally activated (referred to as the originatingentity), or outside of the originating entity. A settlement engine 36keeps a running total (for each entity) of those transactions thatoccurred outside of the originating entity. This data is used togenerate ACH fund transfers required for a specified time period toreconcile the accounts for each entity. Such reconciliation time periodsmay be essentially any time, such as hourly, daily, weekly, monthly andthe like. Entities 1-3 each have a corresponding bank account, which arerespectively referred to as Entity Bank Accounts 1-3.

As an example (as illustrated in FIG. 3), for redemption transactionsthat occur outside of an originating entity, the originating entity mayreceive a debit. For reloads occurring outside an originating entity,the originating entity may receive a credit. Hence, when a customeractivates an account with a certain beginning value, that amount iscredited to the specific customer account using host 30 and to theoriginating entity's bank account. If the consumer makes a redemptionwith the originating entity, host computer 30 simply debits theconsumer's account by the redemption amount and makes a correspondingdebit to the originating entity's bank account. For reloads that occurwithin the originating entity, the consumer's account is credited by thereload amount, and the originating entity's account is also credited.

However, if a redemption is made outside of the originating entity(e.g., Entity3), the originating entity (e.g., Entity 1) will at sometime send a transfer to the redemption entity bank account (e.g., fromEntity 1 Bank Account to Entity 3 Bank Account) for the amount of theredemption. Conversely, for reloads made outside of the originatingentity (e.g., Entity 3), the originating entity (e.g., Entity 1) will atsome time receive a transfer of funds from the reloading entity (e.g.,from Entity 3 Bank Account to Entity 1 Bank Account). Settlement engine36 is configured to periodically perform such reconciliations, andcreates ACH files for the funds transfers between the bank accounts.Such a model thus creates the potential for a fund transfer between eachentity. For example, a DDA Authorization Form may be required from eachentity bank account to the bank accounts of all other entities. Forinstance, for 10 entities, up to 100 authorization forms may berequired.

The embodiment of FIG. 4 utilizes a central bank account 40 to managethe settlement process. With the embodiment of FIG. 4, it is notnecessary to track whether a redemption or a reload occurred at anentity other than an originating entity. Rather, on a periodic basis,settlement engine 36 is used to perform a net settlement analysis of alltransactional data for each entity. The settlement analysis subtractsall negative adjustments occurring within the entity, (i.e. redemptions)from all positive adjustments (i.e. activations and reloads) occurringwithin the entity. Such a process may occur hourly, daily, weekly,monthly and the like.

If an entity's (e.g., Entity 1) net settlement amount is positive,(e.g., the activation and reload amounts exceed the redemption amounts),the settlement engine 36 prepares an ACH file for a fund transfer fromthe entity's bank account (e.g., Entity 1 Bank Account) to the centralentity bank account 40. For negative net settlement amounts (where theredemption amounts exceed the activation and reload amounts for a givenentity), settlement engine 40 prepares an ACH file for a fund transferfrom the central entity bank account 40 to the entity's bank account.Hence, funds are transferred to and from central entity bank account 40as required to zero balance each entity's bank account at the time ofnet settlement.

EXAMPLES

One specific example of settlement processes that may occur using theembodiments described in FIGS. 3 and 4 will now be described inreference to Tables 1-3. Table 1 sets forth the various transactionsthat occur within different stores and different entities. Tables 2A and2C illustrate the accounts as they would appear using the embodiment ofFIG. 3. As shown in Table 2A, a reload is a positive value for theentity where the reload occurred, regardless of whether the entity wasoriginating or non-originating. For redemptions, the value is negative.Hence, as shown in Table 2B, when the accounts are reconciled, allnon-originating transactions (e.g. redemptions and reloads) will involvefunds transfers between the originating entity bank accounts.Redemptions require a funds transfer into the bank account entity wherethe redemption was made, while reloads require a funds transfer to theoriginating bank account. FIG. 2C illustrates the bank accountsfollowing reconciliation. Alternatively, reloads could be credited tothe entity where the reloads occurred so that no funds transfers wouldbe required.

TABLE 1 Transactions Customer # Entity 1 Entity 2 Entity 3 1 $20 A, SN 1−$8 RD, SN6 −$12 RD, SN10 $20 RL, SN5 2 −$10 RD, SN2 $30 A, SN6 −$20 RD,SN7 3 0$10 RD, SN4 −$20 RD, SN5 $50 A, SN12 −$10 RD, SN12 −5 RD, SN11 SN= Store Number A = Activation RD = Redemption RL = Reload

TABLE 2A Account Summary Before Reconciliation (DecentralizedEmbodiment) Transaction Entity 1 Entity 2 Entity 3 Activations $20  $30$50 Reloads by Originating Entity Reloads by Non-Originating Entity  $20Redemptions by Originating Entity −$20 −$15 Redemptions byNon-Originating Entity −$20 −$28 −$12 0  $2 $23

TABLE 2B Cash Flows During Reconciliation Entity 1 Entity 2 Entity 3 $10from Entity 2, RD $8 from Entity 1, RD $12 from Entity 1, RD $10 fromEntity 3, RD $20 from Entity 3, RD $20 from Entity 2, RL

TABLE 2C Account Summary After Reconciliation Entity 1 Entity 2 Entity 3Beginning Balance 0 $2 $23 $10 RD −$10 RD $10 RD −$10 RD $20 RL −$20 RL−$8 RD $8 RD $20 RD −$20 RD −$12 RD $12 RD Ending Balance $20 0 $5

Table 3 below illustrates how the transactions of Table 1 are reconciledusing the embodiment of FIG. 4. As shown, each entity's bank account isbrought to a zero balance, with Entity 2 Bank Account transferring $2 tocentral entity bank account 40 and Entity 3 Bank Account transferring$23 to central entity bank account 40.

TABLE 3 Account Summary After Reconciliation (Centralized Embodiment)Entity 1 Entity 2 Entity 3 Beginning Balance 0 $2 $23 Ending Balance 0 00

The invention has now been described in detail for purposes of clarityand understanding. However, it will be appreciated that certain changesand modifications may be practiced within the scope of the appendedclaims.

1. A method for settling financial accounts, the method comprising:originating a plurality of accounts, wherein originating an accountcomprises collecting a payment from a consumer; receiving at a hostcomputer system financial transaction data resulting from a plurality offinancial transactions on the plurality of accounts, the transactionsoriginating from a plurality of stores, wherein the stores are groupedinto separate entities; periodically performing a net settlementanalysis of the transactional data for each entity; preparing a requestat the host computer system to transfer funds from each entity's bankaccount having a positive net settlement amount into a central entitybank account; preparing a request at the host computer system totransfer funds into each entity's bank account having a negative netsettlement amount from the central entity bank account.
 2. A method asin claim 1, wherein the net settlement analysis for each entity furthercomprises subtracting all negative adjustments from all positiveadjustments.
 3. A method as in claim 2, wherein the negative adjustmentscorrespond to redemptions made at the stores, and the positiveadjustments correspond to activations or reloads made at the stores. 4.A method as in claim 1, wherein at least some of the financialtransaction data relates to requested redemptions, wherein the hostcomputer system includes records on a plurality of customer accounts anda value associated with each customer account, and further comprisinganalyzing the financial transaction data to determine whether thecustomer accounts contain sufficient redemption amounts to cover therequested redemptions.
 5. A method as in claim 4, further comprisingtransmitting from the host computer system to the stores responses tothe requested redemptions.
 6. A method as in claim 1, wherein therequests to transfer funds each comprise an ACH file.
 7. A financialtransaction settlement system, comprising: a transaction processor thatis configured to receive and process financial transaction dataresulting from a plurality of financial transactions that originate froma plurality of stores that are grouped into separate entities, whereinthe transaction processor is configured to process the transactionaldata to activate new customer accounts and to maintain records oncurrent balances for the customer accounts; a settlement engine that isconfigured to perform a net settlement of the transactional data foreach entity to determine whether each entity has a positive netsettlement amount or a negative net settlement amount and to preparerequests to transfer funds from each entity's bank account having apositive net settlement amount into a central entity bank account and totransfer funds into each entity's bank account having a negative netsettlement amount from the central entity bank account.
 8. A system asin claim 7, wherein the settlement engine is configured to perform thenet settlement by subtracting all negative adjustments from all positiveadjustments.
 9. A system as in claim 8, wherein the negative adjustmentscorrespond to redemptions made at the stores, and the positiveadjustments correspond to activations or reloads made at the stores. 10.A system as in claim 7, further comprising a plurality of point of saledevices that are located within the stores for transmitting to thetransactional processor the transactional data.
 11. A system as in claim10, further comprising a plurality of customer presentation instrumentscontaining customer account information that is readable by the point ofsale devices.
 12. A method for settling financial accounts, the methodcomprising: receiving at a host computer system financial transactiondata resulting from a plurality of financial transactions originatingfrom a plurality of stores, wherein the stores are grouped into separateentities, and wherein the financial transactions are associated withcustomer accounts; analyzing each financial transaction to determine theentity from which the financial transaction originated; maintaining arecord of the financial transactions that occurred with the entitieswhere the associate customer accounts originated; and for the financialtransactions that occurred within one of the entities other than wherethe associated account originated, periodically preparing requests totransfer funds into or out from the bank account of the entities wherethe financial transaction amount occurred, and out from or into the bankaccount of the entity where the associated accounts originated,depending on whether the associated accounts are to be debited orcredited.
 13. A method as in claim 12, wherein at least some of thefinancial transactions comprise redemption transactions, and furthercomprising debiting the associated customer accounts by a redemptionamount.
 14. A method as in claim 13, wherein for the redemptiontransactions that occurred within the entities other than where theassociated accounts originated, periodically preparing requests totransfer funds into the bank accounts of the entities where the reloadtransactions occurred and from the bank accounts of the entities wherethe associated accounts originated.
 15. A method as in claim 14, whereinat least some of the financial transactions comprise reload transactionswhere funds are credited to the customer accounts, and for the reloadtransactions that occurred within the entities other than where theassociated accounts originated, periodically preparing requests totransfer funds from the bank accounts of the entities where the reloadtransactions occurred and into the bank accounts of the entities wherethe associated accounts originated.
 16. A method as in claim 13, furthercomprising analyzing the redemption transactions at the host computer todetermine whether the customer accounts contain sufficient funds tocover the redemption transactions.
 17. A method as in claim 16, furthercomprising transmitting from the host computer system to the storesresponses to the requested redemptions.
 18. A method as in claim 13,wherein the requests to transfer funds each comprise an ACH file.
 19. Afinancial transaction settlement system, comprising: a transactionprocessor that is configured to receive and process financialtransaction data resulting from a plurality of financial transactionsthat originate from a plurality of stores that are grouped into separateentities, wherein the transaction processor is configured to process thetransactional data to activate new customer accounts and to maintainrecords on current balances for the customer accounts; a settlementengine that is configured to analyze each financial transaction todetermine the entity from which the financial transaction originated, tomaintain a record of the financial transactions that occurred withentities where the associated customer accounts originated, and for thefinancial transactions that occurred within one of the entities otherthan where the associated account originated, periodically preparingrequests to transfer funds into or out from the bank account of theentities where the financial transaction amount occurred, and out fromor into the bank account of the entity where the associated accountsoriginated depending on whether the associated accounts are to bedebited or credited.
 20. A system as in claim 19, wherein at least someof the financial transactions comprise redemption transactions, andfurther comprising debiting the associated customer accounts by aredemption amount.
 21. A system as in claim 20, wherein for theredemption transactions that occurred within the entities other thanwhere the associated accounts originated, the settlement engine isconfigured to periodically prepare requests to transfer funds into thebank accounts of the entities where the reload transactions occurred andfrom the bank accounts of the entities where the associated accountsoriginated.
 22. A system as in claim 21, wherein at least some of thefinancial transactions comprise reload transactions where funds arecredited to the customer accounts, and for the reload transactions thatoccurred within the entities other than where the associated accountsoriginated, the settlement engine is configured to periodically preparerequests to transfer funds from the bank accounts of the entities wherethe reload transactions occurred and into the bank accounts of theentities where the associated accounts originated.
 23. A system as inclaim 20, wherein the transaction processor is further configured toanalyze the redemption transactions at the host computer to determinewhether the customer accounts contain sufficient funds to cover theredemption transactions.
 24. A system as in claim 19, further comprisinga plurality of point of sale devices that are located within the storesfor transmitting to the transactional processor the transactional data.25. A system as in claim 19, further comprising a plurality of customerpresentation instruments containing customer account information that isreadable by the point of sale devices.